An oil refinery in Texas, March 8, 2020. - Gregory Bull / AP / SIPA
Many analysts wanted to believe it, but ultimately nothing was done. The energy ministers of the G20 countries have not managed to agree on a reduction in oil production. The press release published Saturday after lengthy negotiations does not mention any reduction.
A minimum declaration
It is therefore a cold shower for investors who thought that the financial markets would at least have this good news in the global economic downturn generated by the coronavirus. The final press release published after the virtual summit organized by Saudi Arabia is minimal. It only contains commitments for future cooperation in the fight against the coronavirus, but nothing specific.
"We are committed to ensuring that the energy sector continues to make a full and effective contribution to defeating Covid-19 and enabling the global (economic) recovery that must follow," said the ministers. They also undertake "to take all necessary and immediate measures to ensure the stability of the energy market".
Demand in free fall
Due to the confinement of half the world's population, the demand for oil is in free fall, even though the supply was already in surplus. The Organization of the Petroleum Exporting Countries (OPEC) had mentioned Friday morning a preliminary agreement on a reduction in the world supply of 10 million barrels of crude per day in May and June. This agreement was obtained at a meeting of the main oil producing countries, including Russia, which is not a member of the cartel but the second largest producer in the world.
However, Mexico, also a non-member of OPEC, had not given its approval, which is essential to ratify the agreement. Mexico City indeed found the effort demanded of it excessive (production reduction of 400,000 barrels per day), compared to other countries. A few hours later, Mexican President Andrés Manuel Lopez Obrador said he had reached an agreement with his American counterpart, Donald Trump. Mexico will thus reduce its pumping by 100,000 barrels per day and the United States will reduce theirs by an additional 250,000 compared to their previous commitments.
But even this agreement failed to reach a decision to cut production by the G20. Diplomatic efforts had nevertheless multiplied. Donald Trump had discussed Friday with his Russian counterpart Vladimir Putin on "the latest efforts to fight the coronavirus pandemic and maintain stability in the world energy markets", according to the White House.
For the moment no one is singled out as responsible for the failure. There is therefore still a possible margin for negotiation.
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